In more detail
The expenditure approach adds consumption, investment, government spending and net exports: GDP = C + I + G + (X − M). Imports are subtracted because they are already inside C, I and G but were produced abroad. Nominal GDP uses current prices; real GDP removes price changes, so growth figures normally quote real GDP. GDP counts market production only: unpaid housework, second-hand sales and most of the informal economy are left out. Dividing by population gives GDP per capita, a rough measure of average living standards.
Why it matters
Headlines about growth and recession refer to real GDP, and comparing nominal figures across years mixes up price rises with more output. GDP measures size, not well-being or how income is shared.
Example
With C = 12,000, I = 3,500, G = 4,000, X = 2,500 and M = 3,000 (in billions), GDP is 12,000 + 3,500 + 4,000 + (2,500 − 3,000) = 19,000 billion. With 400 million people, GDP per capita is $47,500. If nominal GDP grows 5% while prices rise 3%, real growth is 1.05 / 1.03 − 1 = 1.94%.